Friday, November 12, 2010

Friday Post: Simpson-Bowles Report

The Simpson-Bowles report: I don't know what to make of it. Would it be better used for toilet paper or for firewood kindling?

Alan Simpson and Erskine Bowles are co-heads of a bipartisan commission set up by President Barack Obama to find some unpopular ideas to reduce the federal deficit, and the draft report they released is actually intended for debate with the other members of the commission; in other words, the report isn't yet a policy idea. The reason for convening this fiscal commission, if I recall, was so that the commission would develop a plan to deal with an unpopular problem, and so that legislators could then merely "sign on" to the plan, rather than having to "debate the merits" of action or, even worse, be forced to "grow a pair" and make a plan themselves. In order for the Simpson-Bowles plan to have worked, it would have had to make cuts in spending AND raise tax rates in roughly equal proportions in order to be bipartisan. But bipartisan it most certainly is not.

The draft report makes a lot of cuts in spending, and even tinkers with social security. But it fails to make tax increases. In fact, as Paul Krugman points out, the goals of tax reform according to the report are primarily to lower tax rates across the board. Deficit reduction, what I thought was the whole purpose of this commission, is relegated to an afterthought. While it lowers the tax rate for the poor from 10% to 8%, it lowers the tax rate for the rich from 35% to 23%. That's two percent for the poor and 12% for the rich.

The commission, ostensibly all about deficit reduction, also fails to talk seriously about the rise in the cost of health care, which is the reason that Medicare and Medicaid expenditures will rise sharply in the future. Kevin Drum of Mother Jones makes the point that any deficit reducing commission without a proposal to deal with Medicare and Medicaid cannot be taken seriously, becuase it isn't federal employee salaries or admission prices to the National Zoo that's causing our future debt problem.

I would like the full commission to keep one key tax increase in the proposal: the gas tax. It is a tax that is badly in need of not only an increase, but also to be indexed to the actual price of gas so that it can do what it was intended to do: pay for highways without an expenditure from the general treasury. It's an idea whose time, I hope, has finally come, for more than just personal reasons.

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